AT&T makes deal with DirecTV

Telecommunications giant AT&T Inc. said Friday that it had agreed to market and sell DirecTV's service beginning early next year, a move that could give the nation's largest satellite provider a considerable leg up over its struggling rival, Dish Network.

Under the agreement, AT&T will begin offering DirecTV as part of its Advanced TV service after Jan. 31, when AT&T's current agreement with Dish Network expires.

The move came as little surprise to industry analysts, who noted that AT&T had signaled earlier that it would stop marketing and selling Dish Network TV services at the end of the year. Dish has been suffering from a high turnover rate among customers while DirecTV has made steady gains.

"This is very good news for DirecTV, but it deals a very serious blow to Dish Network that is already suffering from a series of blows over the last year," said Craig Moffett, a senior analyst with Sanford C. Bernstein & Co.

In August, Dish reported that it lost 25,000 customers in the second quarter, marking the first quarterly decline ever reported by a major U.S. satellite TV provider. The Englewood, Colo., company has about 13.8 million subscribers.

"Dish has been struggling," said Tom Eagan, a media analyst at Collins Stewart.

Dish has a larger share of low-income customers than El Segundo-based DirecTV, making it more vulnerable to fallout from the mortgage crisis, Eagan said. DirecTV, which is controlled by media mogul John Malone and has 17.2 million customers, also has benefited by offering more HD channels.

"We have enjoyed a good partnership with AT&T over the past several years," Dish Network spokeswoman Kathie Gonzalez said. "We look forward to a healthy competition with their U-verse product and DirecTV." The company declined to comment further.

The agreement comes at a time when satellite providers face growing competition from telecom and cable operators pitching bundles of phone, video and high-speed Internet services.

Verizon Communications Inc., for example, has launched its own TV service in the Northeast and AT&T has been rolling out U-verse TV, which delivers television via the Internet. The deal with DirecTV will enable AT&T to expand its TV offerings as it builds up U-verse, which aims to have 1 million subscribers by year-end.